Archive for ‘growth’


China manufacturing returns to growth in March: Caixin PMI

BEIJING (Reuters) – China’s manufacturing sector unexpectedly returned to growth for the first time in four months in March, in a sign that government stimulus measures may be slowly gaining traction, a private business survey showed on Monday.

But growth in new domestic and exports orders was marginal, suggesting the economy will remain under pressure in coming months and will likely require more policy support before it can convincingly stabilize.

The Caixin/Markit Manufacturing Purchasing Managers’ Index (PMI) expanded at the strongest pace in eight months in March, rising to 50.8 from 49.9 in February, above the neutral 50-mark dividing expansion from contraction on a monthly basis and the highest level seen since July 2018.

Economists polled by Reuters had forecast the reading for March would stay unchanged at 49.9. The surprise expansion seen in the Caixin survey echoed that seen in the official PMI released on Sunday, which also showed factory activity defying expectations for another contraction in March.

“With a more relaxed financing environment, government efforts to bail out the private sector and positive progress in Sino-U.S. trade talks, the situation across the manufacturing sector recovered in March,” Zhengsheng Zhong, director of macroeconomic analysis at CEBM Group, said in a commentary accompanying the data release.

China has made proposals in talks with the United States on a range of issues that go further than it has before, including on forced technology transfer, as the two sides work to overcome obstacles to a deal to end their protracted trade war, U.S. officials told Reuters on Wednesday.

But sources close to the talks have stressed that a deal is by no means certain, and tit-for-tat tariffs on both sides have remained in place.

Zhang noted the employment situation improved significantly in March, a trend that may ease some government and investor concerns after the unemployment rate in urban areas for February rose to the highest since early 2017.

Caixin’s findings showed factories added headcount in March for the first time in 65 months, arresting a relentless spell of job shedding since October 2013. Some firms were hiring to support higher production and new business development, the release said.

New orders — an indicator of future activity — increased for the second month running, though the pace of growth was marginal. Output also grew for the second straight month.

New export orders expanded after contracting in the previous month. Though the rate of increase was fractional, Caixin said the broad trend appeared to have steadied in the first quarter.

Chinese manufacturers also signaled an improvement in pricing power in March, which could ease pressure on profit margins. Output charges edged up into expansionary territory and outpaced growth in input prices, reflecting reduced pressure from raw material costs.

“The producer price index might have risen faster year-on-year in March, and increased month-on-month, compared with a monthly decline in February,” Zhong added.

Optimism among businesses edged up to a 10-month high partly on expectations that market conditions, both at home and abroad, will improve, the statement said.

But purchasing activity declined for the third straight month, suggesting some firms remain cautious.
Economists at Nomura have forecast that China’s industrial production growth will moderate again in April and May after a brief rebound in March mainly due to last year’s low base.
Source: Reuters

China Focus: China to lower defense budget growth to 7.5 percent

BEIJING, March 5 (Xinhua) — China will lower its defense budget growth rate to 7.5 percent in 2019, from last year’s 8.1 percent, according to a draft budget report submitted to the annual session of the National People’s Congress (NPC) Tuesday.

The 2019 defense budget will be 1.19 trillion yuan (about 177.61 billion U.S. dollars), figures from the report show.

The rate marks the fourth straight year for the budgeted growth rate remaining single digit, following five consecutive years of double-digit increases.

China’s budgeted defense spending growth rate stood at 8.1 percent in 2018, 7 percent in 2017, and 7.6 percent in 2016.

“The Chinese government has always paid attention to controlling the scale of defense expenditure,” said He Lei, former deputy head of the Academy of Military Sciences.

Describing China’s defense budget increase as reasonable and appropriate, Zhang Yesui, spokesperson for the legislative session, said the rise aimed to “meet the country’s demand in safeguarding national security and military reform with Chinese characteristics.”

“China’s limited defense spending, which is for safeguarding its national sovereignty, security and territorial integrity, poses no threat to any other country,” Zhang said at a press conference Monday.

The expenditure has been mainly used for advancing defense and military reforms, supporting military training and diverse tasks, modernizing weapons and equipment, and improving welfare of service personnel, according to He, who is also a deputy to the NPC.

“The defense budget increase is appropriate against the backdrop of profound changes in the country’s overall strength, its security environment, and the global strategic situation,” He said.

China’s defense budget takes up a fairly small share of its GDP and national fiscal expenditure compared with other major countries, said He, noting that its military spending per capita and per soldier was also very low.

While the national defense spending in a number of major developed countries accounts for more than 2 percent of their GDP, the ratio was only about 1.3 percent for China in 2018.

The United States has increased its national defense expenditure for the fiscal year 2019 to 716 billion dollars, about four times the budget of China, the world’s second largest economy.

China’s military spending per capita is only about one-nineteenth of that of the United States.

“When it comes to whether a country poses a threat to other countries, the key is not that country’s national strength and armed forces, but the policies it adopts,” said Chen Zhou, research fellow with the Academy of Military Sciences.

“China has always been following the path of peaceful development and firmly adheres to a defense policy that is defensive in nature,” Chen said, noting that China’s development would not pose a threat to any other country.

He Lei highlighted China’s role in providing public security goods for the international community, saying the Chinese military had actively participated in UN peacekeeping missions, maintained security of marine passages, and engaged in international rescue and security cooperation.

“The growth in China’s defense spending is the growth of forces for world peace,” he noted.

Source: Xinhua


China to deepen reforms of agriculture sector to boost rural areas

  • Policy statement outlines broad goals including plan to revive domestic soybean production
A farmer picks tea leaves in Mianxian county, Shaanxi province. Beijing’s policy document reiterated a strategy to improve income levels and living standards in China’s countryside. Photo: Xinhua
A farmer picks tea leaves in Mianxian county, Shaanxi province. Beijing’s policy document reiterated a strategy to improve income levels and living standards in China’s countryside. Photo: Xinhua
China will deepen reforms of its agriculture sector to promote its rural economy, the government said in its first policy statement of 2019, as it seeks to bolster growth and offset trade challenges.

Beijing’s statement, released late on Tuesday, comes after the world’s second-largest economy saw its weakest growth in 28 years in 2018 and remains entangled in a trade war with Washington.

“Under the complicated situation of increasing downward pressure on the economy and profound changes in the external environment, it is of special importance to do a good job in agriculture and rural areas,” the government said in the document issued by the State Council and published by official news agency Xinhua.

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Known as the “No 1 document”, this year’s policy reiterated a rural rejuvenation strategy first laid out in 2017 to improve income levels and living standards in China’s countryside.

It also highlighted a plan to boost domestic soybean production but did not offer further details.

Chinese President Xi Jinping visits a farm in northeastern Heilongjiang province during an inspection tour in September. Photo: Xinhua via AP
Chinese President Xi Jinping visits a farm in northeastern Heilongjiang province during an inspection tour in September. Photo: Xinhua via AP

Industry analysts said on Wednesday they were eagerly awaiting further details to assess the impact of the plan, which had already been flagged by Agriculture Minister Han Changfu earlier this month.

China has been overhauling its crop structure in recent years, reducing support for corn after stocks ballooned, and seeking to promote more planting of oilseeds that it mostly imports.

That goal has become increasingly important since a trade war with the United States, which led China to slap tariffs on soybean imports, tightening domestic supplies.

Han has previously urged authorities in China’s northeast to support soybean production through subsidies and called for rotating of soybeans with other crops including corn and wheat.

Beijing also aims to support the production of rapeseed in the Yangtze River Basin, according to the document.

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As in previous years, it also called for stable grain production, but also an increase in imports of agriculture products where there are shortages in the domestic market.

“The focus now is on retaining production capacity, in the form of high quality farmland, and using the international market to make up production shortfalls,” said Even Rogers Pay, an agriculture analyst at China Policy, a Beijing-based consultancy.

The reference to imports is positive for trade partners like the United States, said Cherry Zhang, analyst with Shanghai JC Intelligence, who said it raised the likelihood that China will buy more US agriculture products.

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Shares of Chinese livestock companies, along with pig and poultry breeders, rose on Wednesday following the release of the policy paper.

The document also outlines plans to accelerate development of a new farm subsidy policy system and further crack down on the smuggling of agriculture products.

Additionally, the government said it plans to strengthen the monitoring and control of African swine fever outbreaks, after more than 100 cases were reported in China since August.

Other plans include continuing to tackle rural pollution and promoting recycling of agricultural waste such as manure and agricultural film.

Source: SCMP


Bank lending for ‘real economy’ key to boost China growth – central bank official

SHANGHAI (Reuters) – China should encourage its banks to support smaller, private firms in the real economy, rather than forced lending or policies such as quantitative easing, a state newspaper quoted a central bank official as saying on Saturday.

“The central bank doesn’t wish to use administrative methods to require banks (to lend),” Sun Guofeng, head of the monetary policy department at the People’s Bank of China (PBOC), told the Financial News, a bank publication.

“It wants to establish positive encouragement mechanisms though monetary policy tools to encourage banks to actively increase their support for the real economy, especially towards smaller and privately-owned firms,” Sun said.

The comments come a month after Sun wrote a commentary in which he argued that problems with timely capital replenishment, bank liquidity gaps and poor rate “transmission” are three major constraints on banks’ supply of credit.


In the interview with the Financial News, Sun said monetary policy transmission had “noticeably improved”, showing that steps to enhance transmission mechanisms had been effective.

He said the central bank would increase the strength of innovation in monetary policy tools.

Perpetual bond issuance “is only one breakthrough” in reducing capital constraints on banks, Sun said, adding that “other methods” could be used in the future.


He said that quantitative easing was neither necessary nor possible at the moment, noting that under China’s financial system the significance of the central bank buying Chinese treasury bonds on the secondary market is limited, and that the PBOC is barred from buying the instruments on the primary market.

China’s banks made the most new loans on record in January following a series of moves to boost lending as authorities try to prevent a sharp slowdown in the world’s second-largest economy.

Source: Reuters


China’s rural areas surpass cities in growth of digital consumption

HANGZHOU, Jan. 29 (Xinhua) — Alibaba’s Tuesday report shows that China’s rural areas are growing faster than some first-tier cities in digital consumption.

Statistics indicate that the growth rate of digital spending on Alibaba’s e-commerce platforms in rural areas reached 23.8 percent last year, 4.5 percent higher than that in first-tier cities of Beijing, Shanghai, Guangzhou and Shenzhen.

The huge consumption potential in rural areas would be turned into a major engine of growth as a result of the digital economy, more internet access and faster logistics, said the report.

Moreover, the internet will narrow the gap between the country’s developed eastern regions and the less-developed remote areas.

The report suggests that digital consumption further drives the sales of agricultural products in rural areas as more farmers turn to live-streaming and other popular internet marketing tools to attract customers.

In 2018, state-level impoverished counties sold goods worth over 63 billion yuan (about 9.4 billion U.S. dollars) on Alibaba’s online shopping platforms, with the most popular hits being agricultural products.

Source: Xinhua


Sandro-owner SMCP eyes growth and investment in China

PARIS (Reuters) – SMCP, the group behind fashion brands Sandro and Maje, will keep up investments in e-commerce and new stores in China this year and expects sales to grow strongly, countering a simmering Sino-U.S. trade war, the French company’s CEO said.

The retail group – whose affordable luxury brands, which also include Claudie Pierlot, sell dresses in the 200 to 400 euro range – had doubled annual revenues in the past four years to 1 billion euros, with a rapid expansion of its shop network and after breaking into markets such as China

Investors are on edge over signs Chinese shoppers might start spending less on high-end brands due to the Washington-Beijing trade spat, which has already hit their overseas purchases as the yuan falls.

Business in Hong Kong, for instance, a magnet for Chinese consumers, was “a little softer” as a result of currency swings, SMCP’s Chief Executive Daniel Lalonde said in an interview.

But he added that the group was still investing in mainland and greater China, which makes up the bulk of its sales in Asia Pacific, SMCP’s third-biggest region after its French home market and the rest of Europe.

“From our perspective, everything is still intact (in China). Any slowdown in our business is related to the comparison base (…) and we still expect to grow that market over 20 percent in 2019,” Lalonde said. “We’re still confident on the region.”

SMCP, controlled by Chinese retail group Shandong Ruyi, earlier on Monday reported a 8.1 percent increase in fourth-quarter sales at constant currencies, which came in at 276.1 million euros (239.4 million pounds), in line with forecasts.

Momentum in Asia Pacific slowed from the previous three months, but mainland China was particularly strong, the group said.

In France, SMCP had to shut some stores on successive Saturdays in November and early December along with its rivals due to anti-government “yellow vest” protests, costing the firm 4 million euros in lost revenue, Lalonde said.

Its French sales fell 1.9 percent at constant currencies in the fourth quarter, less than expected by some analysts and helped by a spike in online sales.

SMCP’s shares jumped more than 4 percent in early trading but were down 4 percent by 1218 GMT, with European shares more broadly in negative territory following underwhelming industrial data from China.

Source: Reuters


China upbeat about 2019 foreign trade growth: MOC

BEIJING, Jan. 17 (Xinhua) — China is confident in its ability to keep foreign trade growth stable while improving its quality this year despite greater external uncertainties, the Ministry of Commerce (MOC) said Thursday.

“The development of China’s foreign trade remains on a strong and solid foundation,” MOC spokesperson Gao Feng told a news conference.

The confidence derives from deepening supply-side structural reform, improvement in the country’s foreign trade structure and increasing internal impetus to growth, Gao said.

The ministry has unveiled a list of 30 key markets for foreign trade expansion this year, which will see China actively tap into the potential of emerging and developing economies related to the Belt and Road Initiative while continuing to explore the traditional markets in developed countries.

Gao said the ministry will offer enterprises greater support including trade promotion, public information services and government institutional safeguards for trade market diversification.

“We will roll out more measures in a targeted and timely manner to help foreign trade firms turn challenges into opportunities and achieve innovational development,” Gao said.

Commenting on the decline of China’s foreign trade growth in December, Gao said the growth in the fourth quarter was still within reasonable range despite the monthly fluctuation.

“The fluctuation was mainly caused by weaker demand in the international market and a high basis the previous year,” he said.

China’s import and export volume hit a historic high of 30.51 trillion yuan (about 4.5 trillion U.S. dollars) in 2018, up 9.7 percent year-on-year, official data showed.



Chinese premier urges efforts to keep growth within reasonable range


Chinese Premier Li Keqiang presides over a plenary meeting of the State Council, which discusses a draft version of the government work report and analyzes economic work in the first quarter of 2019, Jan. 14, 2019. (Xinhua/Rao Aimin)

BEIJING, Jan. 14 (Xinhua) — Chinese Premier Li Keqiang on Monday called for efforts to ensure economic growth within a reasonable range.

Chairing a plenary meeting of the State Council, which discussed a draft version of the government work report and analyzed economic work in the first quarter of 2019, Li said the country faces a more complicated development environment this year, with growing challenges and downward pressure on the economy, creating arduous tasks for the government.

He urged efforts to strike a balance among stabilizing growth, promoting reforms, restructuring, improving people’s well-being and preventing risks.

The government will strive to innovate and improve its macro-regulation but not resort to massive economic stimulus, Li said.

He said the country will keep economic growth within a reasonable range through range-based, targeted and precise regulation, and resist downward pressure with market vitality unleashed by reform and opening-up.

The government will continue to improve the business environment, foster new momentums, improve weak links, expand the domestic market, and promote coordinated development among different industries and regions.

Efforts will be made to extend the country’s advantage of having sufficient maneuver room for economic development, improve people’s living standards, promote high-quality development, and lay a solid foundation for securing a victory in building a moderately prosperous society in all respects, Li said.

He urged relevant authorities to better implement policies aimed at supporting enterprises and improving people’s livelihood, stabilize and boost market confidence, and strive for a good start to the economy in the first quarter to create conditions favorable to achieving major economic and social development targets set for 2019.

The country achieved its key economic and social targets in 2018, which Li said were “hard-won.”

The draft version of the government work report, which will be submitted for deliberation at the annual session of the National People’s Congress in March, will be distributed to provincial governments and central government departments to solicit opinions, according to a decision made at the meeting.


China tightens control of local economic data ahead of expected weak growth next year

  • Authorities in Guangdong, nation’s manufacturing powerhouse, told all future purchasing managers’ indexes will be produced by National Bureau of Statistics
  • Ruling comes ahead of what is likely to be tough start to 2019 for China’s economy as trade war bites
PUBLISHED : Monday, 17 December, 2018, 2:26pm
UPDATED : Monday, 17 December, 2018, 3:05pm

China’s central government has ordered authorities in the country’s export hub, Guangdong province, to stop producing a regional purchasing managers’ index for the manufacturing sector as it seeks to control the flow of sensitive economic data.

The order by the National Bureau of Statistics (NBS) means the province will now not release purchasing managers’ index (PMI) data for either October or November.

The move comes as Beijing looks to tighten its grip on the dissemination of economic news amid the trade war with the United States. Industry insiders and analysts raised concerns about what the move means for disclosure of the real impact of the conflict on local businesses.

The demise of Guangdong’s PMI came unannounced as the Guangdong government just stopped releasing the data.

When an individual inquired as to why Guangdong had stopped releasing its own PMI, the Guangdong Industry and Information Technology Department issued a brief statement on December 10, buried deep in the website, saying that it had received a notice from the NBS at the end of October and was told that all PMI compilations must be conducted by the NBS. Given this directive, it decided to stop compiling and releasing the provincial PMI from November 1 on.

Phone calls to the NBS information office went unanswered on Monday and the bureau has not replied to faxed questions from the South China Morning Post.

The Guangdong provincial PMI, complied by the Guangdong’s Industry and Information Technology Department, has been released on a monthly basis since November 2011.

When the Guangdong government decided to produce its own PMI that year, it said in a statement that Guangdong, which is a global manufacturing hub, was in need of its own PMI to help inform economic policymakers, enterprises and analysts so that they could accurately predict economic performance of the province and even the whole country.

“For instance, Chicago used to be the heartland of US manufacturing, and the Chicago PMI is often regarded one of the most significant [US] economic indicators by economists,” the Guangdong government said then. The Guangdong PMI is calculated based on a survey of 1,000 key enterprises in the province.

Peng Peng, vice-president of the South Nongovernmental Think Tank in Guangdong, said the demise of the provincial PMI would be a loss to the local business community.

“Guangdong’s monthly PMI was an important lead indicator showing China’s real economic situation,” he said.

Without it, local companies would have to rely on official statistics reported by the central government – via the NBS – or on official views of how manufacturing companies were doing in China, he said.

The owner of an export-oriented manufacturing business in Guangzhou, the capital of Guangdong, said he was concerned by the central government’s move as it suggested the economy might be in even worse shape than he thought.

“Timely and transparent PMI data is not only important for Guangdong companies but for all businesses nationwide, because Guangdong is China’s main economic engine,” said the person, who asked not to be identified.

“I’m actually worried about the official move. I think the situation in the manufacturing sector will be really bad in the coming year, and that might be why Guangdong’s provincial monthly PMI needed to be shut down.”

The Guangdong PMI for the manufacturing sector actually rose in September to 50.2, from 49.3 a month earlier. Readings above 50 points indicate the sector is expanding.

It is not the first time China’s statistics bureau has tightened control over PMIs not produced in house. The bureau in 2015 ordered a private compiler of a Chinese PMI to stop releasing preliminary readings that came out a week before the official release.

The tightened control by NBS over Guangdong’s PMI comes at the same time as the statistics bureau reduces the autonomy of local governments to produce their own gross domestic product data.

According to a notice issued by NBS in October 2017, the NBS will compile provincial GDP figures directly from 2019 onwards, taking over the work of local provincial statistics bureaus, so that the gaps between provincial and nationwide GDP data would be smaller. The NBS notice at that time only mentioned GDP data and did not touch on other indicators such as PMI.


Lowest retail sales growth for 15 years dash China’s hopes that consumption will offset trade war

Beijing had high hopes that tax cuts for individuals would lift consumer spending and boost an economy which is showing the effects of the trade war, but overall retail sales in November proved disappointing.

Even record spend on Singles’ Day’ on November 11 could not prevent retail sales from posting their weakest growth rate in 15 years.

November’s retail sales, which covers both corporate and consumer spending, stood at 3.52 trillion yuan, down from 3.55 trillion yuan in October, according to data released by the National Bureau of Statistics on Friday.

The growth rate fell to 8.1 per cent compared to November 2017, below the 8.6 per cent rate in October. The figure was also below the 8.8 per cent growth forecast by a Bloomberg poll of economists. Adjusted for inflation, the growth was even lower, at 5.8 per cent.

As the US-China trade war continues to weigh on exports, Beijing is counting on households and companies to spend more to stabilise growth.

However, weak consumption underscores the difficulties the Chinese leadership is having in its efforts to keep the economy stable.

The government expected that its October move to raising the threshold for taxable personal income to 5,000 yuan per month would release unlock spending power equivalent to hundreds of billions of yuan.

It appears likely that some consumers saved their extra income for the November 11 shopping festival, when they can benefit from large discounts.

Shen Li, a physical therapist from Beijing, said his monthly after-tax income increased by 1,000 yuan due to the tax cut, which he used to purchase items such as household appliances on Singles’ Day.

Singles’ Day, China’s version of the US’ Black Friday, is often seen as a gauge of Chinese consumers’ spending power, but in the past it has not been able to drive up total retail sales figures.

This year’s Singles’ Day sales across Alibaba’s e-commerce platforms totalled US$30.8 billion, dwarfing the online sale numbers for Black Friday and Cyber Monday combined. But the growth rate of total transactions fell to 27 per cent, from last year’s 39 per cent.

The late October launch of Apple’s new iPhone XR, which is cheaper than the earlier iPhone XS series, did not boost telecom sales in China, which dropped 5.9 per cent in November year on year, to 48.5 billion yuan.

However, a plunge in car sales was the main culprit for weak consumption. Auto sales were down 10 per cent on a year earlier, to 345.9 billion yuan, according to the statistics bureau figures, as auto dealers struggled to clear their inventories.

This matched industry surveys from the China Passenger Car Association (CPCA), which reported this week that retail sales of sedans, multi-purpose vehicles and sport utility vehicles plunged 18 per cent to 2.05 million units last month, which makes a full-year decline very likely in the world’s largest auto markets.

Ding Shuang, chief China economist from Standard Chartered Bank, said weak auto sales were caused by the expiration of tax rebates for smaller cars, a slowdown in consumer loans partly due to the crackdown in online peer-to-peer lending platforms, and subdued property investment, since new homes are often sold together with garages.

Local commentators worried about ‘downgrading’ of consumption in 2018 as spending on premium goods slowed.

The growth of real estate investment from January to November remained stable at the 9.7 per cent rate seen in the January to October period.

“The decline of consumers’ abilities and willingness to spend is going to first cut down on big ticket items like cars,” said Jiang Chao, chief economist from Haitong Securities. “Auto accounts for two-thirds of China’s consumption of consumer durables.”

Rising household debt has given Chinese policymakers few options to boost spending other than cutting taxes. China’s household debt-to-GDP rose to 49.3 per cent in the first quarter, which was lower than in advanced economies but higher than the average 40 per cent among emerging economies, according to the Bank of International Settlements.

“Household debt will continue to rise and so debt service costs will remain a drag on consumption. But the debt service burden on households should not get much worse unless there is a big acceleration in credit growth (which we do not expect),” Ernan Cui, an analyst from research firm Gavekal Dragonomics, wrote in a report.

“Local commentators worried about ‘downgrading’ of consumption in 2018 as spending on premium goods slowed,” Cui said. “The biggest boom in products favoured by affluent households is probably over, but consumption upgrading will continue as long as income growth does.”

NBS spokesman Mao Shengyong said at a press conference on Friday that China still had the potential to maintain a stable and fast rate of consumption growth next year, given the rise in the number of middle class citizens.

Economists are eyeing new individual tax deductions that will go into effect next year and more tax relief for private companies to prevent the economy from slowing further.

A more complex tax deduction policy which takes in six types of expenses – from elderly care to medical costs- could inject an additional 80 billion yuan in consumers spend, according to Cui’s estimate.

Beijing has also indicated that it will tighten the collection of social insurance contributions that employers are required to pay, but analysts fear that this could negate the benefits of the tax deductions for employees.

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